Wednesday, July 9, 2008

Analogy #193: Chase or Stand

THE STORYOnce upon a time, there were two dogs—Bingo and Duke. Both loved to chase cars.

Bingo especially loved convertables. Whenever Bingo saw a convertible going down the street, he would chase it. Wherever the car went, that’s where Bingo went, mile after mile after mile. It was very tiring for Bingo, but he found it very satisfying. Occasionally, he would even catch the convertable.

Duke had a different approach. He would hang out at the race track. Rather than run after the cars, Duke would just stand by the edge of the track. Duke knew that he wasn’t fast enough to catch those race cars, but he also knew that because the track was oval, eventually those cars would come around and be right next to him again. Every time the car completed a lap, it had to pass by Duke. Each time the car passed by, it felt to Duke as if he had “caught” the car.

At the end of the day, Bingo would be extremely tired and have very few “catches.” By contrast, Duke would be well rested and have lots of “catches.”

THE ANALOGYFor the dogs in the story, the goal was to catch a car. For businesses, the goal is typically to complete a transaction with a customer.

Each dog took a different approach. Bingo locked in on a particular type of car and chased it wherever it went. Duke locked into a particular location and let the cars come to him. Both had success.

During the strategic process, one must choose a method for creating customer transactions. One can either lock in on a particular customer segment and chase it like Bingo, or one can lock into a position and let the customers come to them (like Duke). Both can work. But you have to make a conscious decision during the planning process as to which option you are going to choose.

THE PRINCIPLEStrategies are based upon finding the best way to sell something to somebody. This involves making some choices:

- What to Sell (product/benefits strategy)- How to Sell (the winning formula, the attribute strategy)- Who to Sell to (the marketing target strategy)

When choosing the “somebody” of strategy, there are essentially two options: Chase or Stand. Chasing is all about following a particular customer. Wherever they go, you try to anticipate and serve them, just like Bingo.

Standing is about owning a particular solution and then serving whomever crosses your path in need of that solution. Customers come and go, but you stand solid. This is what Duke did.

Are you going to be person-focused (chase) or solution-focused (stand)?

This question comes up in business all the time. Take MTV, for example. Over the years, it has created strong bonds with teenagers. Unfortunately, teens eventually grow up and become twenty-somethings. This leads to a strategic choice—do you “grow up” with the audience that loves you and chase them into their twenties (person-focused) or do you let them go and wait for the next crop of teens (solution-focused)?

There are pros and cons to each. On one hand, it’s hard to create strong consumer bonds to a brand. Once you have a customer who loves you, why let them go? Why not chase them into adulthood, modifying the brand to keep up with their changing demands? This is what Bingo would do.

On the other hand, MTV knows the youth market. They may not succeed in the transformation to older fare. And, just as Duke knew that the cars would keep coming, MTV knew that there would always be more teens coming down the road. So why not stick to the teen position?

One thing MTV did know is that they could not succeed with both alternatives using the same brand. They had to make a choice. MTV chose to be like Duke—stick to its position and then grab each generation of teens as they passed by. VH1 then became the brand you were supposed to migrate to when you grew up.

This strategic choice worked well for a long time. Unfortunately, the latest crop of teens is less enamored with a TV-centric approach. Brands like You Tube and Ipod are starting to take the place of MTV. Like an old dog, MTV was slow to learn the new tricks. Just because you choose to stand does not mean that you can stop innovating.

Sears right now is trying to win over the teen customer. They have set up a prom website, are starting an exclusive line of teen clothes from LL Cool J, and are partnering with MTV on the movie “The American Mall.”

This strategy will be tough. Other retail brands already have strong bonds with that segment. Sears’ current strength is with older customers who remember the glory days of the brand. Perhaps Sears would be best served finding more ways to chase the older customer through time—to migrate the brand into exciting new areas which appeal to the boomers as they age.

Let’s look at a couple of grocery retailers: 7-Eleven vs. Whole Foods. 7-Eleven is not chasing particular people, they are owning a position—convenience. Sometimes people are looking for convenience, sometimes they want something else (selection, low price, etc.). 7-Eleven is counting on the fact that although you may not want convenience all the time, almost everyone wants convenience some of the time. 7-Eleven doesn’t care about chasing those people around as their desires change. They just stand firmly on convenience, and take whomever at that moment wants convenience. As long as there are enough of these desires at any time, the strategy works.

By contrast, Whole Foods is locked into a particular type of person—someone who sees food as more than just fuel. They have a passion for health, wellness and natural, organic items. Whole Foods will chase this customer wherever they go. That is why Whole Foods has expanded into healthy organic restaurants, healthy organic catering, natural organic health care and well-being products, and so on.

When chasing, you typically want to grab a large percent of the spending over a large span of time from a small group. This is the “share of wallet” or “Lifetime Value” strategy—empty the pockets of a small group who loves giving you their money for all their needs.

When standing, you don’t mind taking a small percentage over a short period, provided to total demand pool is large enough. This is more of a “toll booth” strategy—grab a little from everyone as they pass by.

For another example of chasing versus standing, let’s look at the retailing of Christian-related products. On the one hand, there are Christian “Bookstore” chains, like Lifeway that are chasing the advocate of the Christian lifestyle. I don’t even know why they call them bookstores anymore…books are only a small part of the mix. Instead, they are selling the entire Christian lifestyle. They have coffee bars, hold Christian music concerts, and sell tons of knick knacks with Bible verses on them.

These Christian lifestyle stores are going after that lifetime share of wallet. They chase a small group of people (those advocating a Christian lifestyle) and try to sell everything related to that lifestyle. Whatever the latest fad is in that lifestyle, they are there, because their customer is there.

By contrast, Wal-Mart also sells some of this Christian merchandise. But Wal-Mart is not chasing this customer. They are standing firm on low price. As the economy ebbs and flows, the number and types of people who are looking for low prices varies, and Wal-Mart takes whomever is interested in low prices at that moment.

Some of these people are interested in Christian literature at a good price, so Wal-Mart sells it. However, Wal-Mart also sells literature that has nothing to do with Christianity. So rather than trying to get all of the Christian advocate’s wallet, Wal-Mart is just looking to get a small “toll” from them as well as all sorts of other people who are drifting through a price sensitive phase of their life.

SUMMARYStrategy is about making choices. One choice to be made is how to approach consumers. Either you can focus in on a particular group and go wherever they go (chasing strategy) or you can focus on a solution and grab some money whenever someone drifts into needing that solution (standing strategy). Both can work, but your strategy will most likely fail if you try to do both. You have to make a choice.FINAL THOUGHTSThere are these rope chew toys for dogs where the dog clamps its mouth on one end and the owner grabs the other end. The game is to see if the owner can yank the rope out of the dog’s mouth. Almost always, the dog wins, because they have such a strong grip on the rope. Whether you are using the rope of chasing (chomping on a group of customers), or the rope of standing (chomping on a solution), you need to grab on as tightly as those dogs do.

About Me

I have over 25 years of experience, having worked in strategy with a number of leading US retailers. You can learn more about me by visiting my digital resume (www.VisualCV.com/geraldnanninga) of the site for consulting (http://planninga-from-nanninga.webs.com)